Distorted Facts on Distorted Demand

The chief cause for the American health care crisis isn't the cost
– it's the debate.

I do not enjoy enthusiastic politics. I don't join parties. I don't attend rallies. And I view most political ideology, and the impromptu debates that pop up around them like mushrooms, as I would a great big pile of steaming excrement.

But the debate on health care reform is different. I've engaged the discussion with a higher level of attentiveness and engagement. The only thing that surprises me about it is how utterly distorted and one sided the editorials have grown.

You can find heaps of distortion in every political discussion that either harps about repeal of the ACA (aka "Obamacare") or pleads for its continuance. You also find it innocently placed in op/ed articles - like this one written by an technologist named David Goldhill and published in 2009 in the Atlantic Monthly. The article touts a dramatic headline: How American Health Care Killed My Father. In it, Goldhill opines on what he believes are the unattractive prospects for American's seeking coverage for health care. Indeed the prospects are about as ugly as they get. ACA is nothing like a perfect solution - at best, it's the best temporary political stop-gap for out-of-control inflation and unfair administrative practices on the part of private insurance carriers. The capper for Goldhill is how the broken healthcare insurance system has personally affected him.

My perspective is fueled by the research I've done mostly in the service of clients but also in covering health care issues for various business and lifestyle journals. What I have found that much of the public debate for or against one aspect or another is often based upon a supportive political ideology. Folks like Goldhill are emotionally-motivated to make the strongest demonstration of the various points that prove that they're right. In my own humble opinion, most of that effort is irrelevant because so few of them have committed nothing more than an emotional response to a pesky administrative problem. On the rare occasion that they bridge their emotions for a more practical or rational attitude, they fog their logic with hyperbole and contradictions.

I singled out Goldhill over many others primarily because he has personally invested himself on changing the system. Bravo for him on stepping up. His articles read well, he presents himself clearly as he communicates his personal frustration with the existing system. But like so many pundits in this arena, he is so emotionally-driven to win the argument that he tends to follow a template of profound errors and misjudgments.

For instance, he abhors government involvement in health care delivery, then concedes that a 'single-payer' system may be a better solution. I'm not sure how you get to a single-payer system without at least some government involvement. He points to failures in Medicare and other single-payer systems (the Canadian system is a favorite) and uses them as examples of how costs will continue to skyrocket as care will decline. This is another error because he assumes that consumption and cost are constant (which, they are obviously not - I'll explain this later).

I suspect that Goldhill himself is at least aware of some distortions. For instance, he acknowledges distorted demand as a possible cause for inflated health care cost. I couldn't agree more. But here's the thing, he consistently fails to identify the source of the distortions for demand. Happily he avoids the hard right suspicion that poorer people put more demands on health care because they are fat and lazy[^1]. Left-leaning pundits (and many moderates) are more likely to point to various an evil corporate system that makes people unhealthy so that corporations can make more money making them well.

Yet, Goldhill can't resist the simplistic notion that for the U.S. to achieve better health care we should let the markets decide. We've already tried that, right? Commercial insurance is one of the primary reasons we're in the predicament we are today. Haven't we learned from our Marketing 101 class that prices always go up with demand? That's how the free markets are wired. It's surprising how many people seem to miss that key point.

To be clear, single-payer (universal health care) is not a magic bullet that will solve cost inflation AND grow services. Granted that there have been several studies that point to huge reductions in health cost due to greater negotiation power from a government-controlled single-payer. However, what the studies to not show is that many providers (esp. individual practitioners and clinics that provide specialty services) simply bail out of the insurance program if they can't get their fees. There's also another important point: you can legislate some aspects of service and delivery, but you simply cannot force people to serve a market of your own design. For one thing, it's unconstitutional. For another, such a system would probably discourage growth and service diversity.

Neither side allows a clear picture for solving the crisis that faces us: inflated health care cost for less care. Instead, they dig their heels in and often follow another pattern of adding "expert opinions" on top of their distortions and speculation with selective statistics and other studies that "prove" (a) various causes of the ongoing health care crisis and (b) why opposing opinions are wrong. The debaters doggedly pursue problems and propose "clear" solutions, but never arrive at sustainable systems. That's why the Democrats hatched Obamacare - a "cure" that nearly everyone involved KNEW was imperfect from the very day of inception.

I believe we've gone too far down this road. The true cure is obscured by years of debate and the unfortunate consequence of too many counterpunches. For instance, were we to focus simply on the single issue of "distorted patient demand" as a cause for cost inflation, you could go back to 1973 when some researchers say our problems really began. That was the year that Senator Edward Kennedy pushed through the Health Maintenance Organization Act of 1973 (signed into law by Richard Nixon).

People who remember the change often recall the days before "managed" healthcare. These were times, they say, that doctors took time to know every patient - personally, intimately. Think "Marcus Welby MD." Back then, doctors were considered super parents - people who could stop people from spitting and cussing just by walking into the room. They knew our habits, our health history, and a whole lot about us that nobody else should ever know. Then, along came the HMO. Instead of a house calls the doctor-patient relationship was screened by switchboards, appointment desks, patient timelines, and productivity quotas. Doctors who wanted to participate in the new system were discouraged from offering preventative healthcare advice because the non-health care administrators said that such interactions were off task and wasteful [^2].

Some political opinionists note the benefits of good patient-doctor relationships, but they either underestimate the significance or marginalize the potential fiscal benefits. It is rather significant that every patient care research conducted for the last twenty years has demonstrated that good doctor-patient relationships (as opposed to cost-containment measures) tends to curtail demand [^3] [^4]. Moreover, improved patient-doctor communication also produces measurable improvement in clinical outcomes thereby creating an environment where demand is reduced further [^5] [^6] [^7]. Most studies that I found measured reductions depending upon the type of care provided (often, patients with catastrophic diseases). I'd think that it's very difficult to produce a rigorous study on general care in the U.S. since almost all care is managed. However, Marketing 101 tells us that when demand goes down, so do prices. Therefore it is a mistake to treat 'consumption and cost' as constants when obviously they are not.

Clarity within the confabulation...

Opinionists from both sides don't realize that they've buried the debate with so much confabulation that it's hard to sort rational reality with the imagined one. Is it any surprise that politicians miss the major points? Maybe the first step toward better health care in the U.S. is removing the distortions created by 'managed care' in the first place.

Nobody can argue against the idea that public policy on health care must encourage greater doctor-patient interaction. Perhaps the system may reward doctors for dispensing wellness advice and resources. We may also realize additional savings through more aggressive use of what some researchers call 'deprofessionalization' in the health care system – utilizing physicians assistants rather than MDs to dispense services and monitor wellness, treatment maintenance, and other non-critical care[^8] [^9].

To be clear, "Patient Wellness" is not a new concept. A hybrid wellness program was promoted in the "Baucus Reform Proposal" (2009), some of which was stitched into the Affordable Health Care Act: a political mishmash that benefitted insurance companies more than providers and patients, plus more managed care at greater expense. I haven't found research to support this point, but it certainly looks that way.

Bottomline, I do not believe that the American health care crisis can be solved by politicians, much less the gaggle of pundits who are more interested in the argument than they are the outcome. Many voters are hoodwinked into believing that something good may yet come from further debate. But we've tried the political route - repeatedly - and look where it has left us. And do we really want to expand Medicare? Maybe - but we'd better figure out how we'll deal with providers who will likely opt-out. Do we need to force everyone into the insurance pool? Perhaps - but we'd better get a clearer picture of the constitutionality of the issue (e.g., is it a tax or not?).

Universal confusion makes politics ill-equipped to build a fair and timely solution like Universal Care. I believe what we need is a non-government organization, a national health network that provides both insurance and services. One health care delivery model that has surfaced quite a bit in the debate is Kaiser Permanente, a health care provider that operates a massive system in California and nine other states. Kaiser is actually a "prepayment" system where member patients pay into the program via paychecks or other means to maintain the system. Maybe we could examine how such a system could work nationwide.

The point of this exercise is to demonstrate how important it is that every adult stay engaged. We can support legislative efforts that make sense and do what we can to ensure that old mistakes are not repeated. First, everyone must adopt a personal commitment to absolve ourselves of the distortions created by politically motivated debates. I believe that consensus is just around the corner. We need only to find national clarity and the answer will present itself.

[^4]: Kaiser Family Foundation, Agency for Healthcare Research and Quality (2004). Update on consumers’ views of experiences with patient safety and quality information. Rockville (MD), Agency for Healthcare Research and Quality, 2004 Nov.

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One response to “Distorted Facts on Distorted Demand”

I think we have a lot more common ground than not. I strongly believe that daily health care decisions should be between a patient and doctor, with the patient using their “own” money. As someone who spent most of their working life developing management systems for physicians I am acutely aware of how absurd the current fee-for-service system has become. I’ll readily admit that the solutions presented in the Atlantic Monthly article aren’t perfect and all encompassing. They are however a refreshing “outside the box” look at some solution. Heck, it took our legislators over 1,000 pages to articulate their plan.